Klarna tops third-quarter revenue estimates in first earnings report since IPO

Klarna has exceeded Wall Street's expectations for third-quarter revenue, marking a significant moment as it releases its first earnings report following its debut on the New York Stock Exchange in September. The company's revenue shot up by 26%, reaching $706 million compared to the same period last year. Despite the revenue growth, Klarna reported a net loss of $95 million, a stark contrast to the $12 million net income recorded a year earlier. The buy now, pay later service has found substantial growth in the U.S. market, where its gross merchandise volume surged by 43% year-over-year. Overall, gross merchandise volume increased by 25%, rising to $32.7 billion from $26.2 billion. Key features such as the Klarna Card and fair financing, which allows for longer payment options on larger purchases, have been pivotal in driving U.S. growth. The Klarna Card, launched in July, has attracted over four million customers and accounted for 15% of transactions by October. CEO Sebastian Siemiatkowski noted that fair financing has doubled the user base compared to last year, but it still only engages about 20% of merchants, presenting significant growth opportunities. Klarna's merchant partnerships have also expanded, increasing by 38% to 850,000 from 616,000 in the previous year. However, the average revenue per active customer has seen a decline of roughly 10%. After postponing its initial public offering plans earlier this year amid market volatility linked to tariff policies, Klarna entered the stock market approximately two months ago. Recently, the stock market has faced challenges, with concerns about a potential AI bubble leading to declining stock values. Klarna itself has seen over a one-third drop from its peak share value. Siemiatkowski remarked that the firm has yet to detect significant shifts in consumer spending or repayment behaviors due to the current economic climate, although they are closely observing the forthcoming impacts of AI on various professional sectors. Klarna has heavily invested in artificial intelligence, which has enabled the company to reduce its workforce by 40% through natural attrition, which can reach up to 20%. This trend isn't unique to Klarna, as companies like Palantir, Salesforce, and Amazon have also indicated plans to reduce workforce numbers or slow down hiring due to AI advancements. Siemiatkowski emphasized that AI is integral to Klarna’s customer-centric approach, noting that the average time to resolve customer service inquiries has dropped to under two minutes. He cautioned, however, that businesses relying solely on AI for customer interactions might be making a mistake, as maintaining a human connection is invaluable.